IPO ANALYSIS: TALWALKARS BETTER VALUE FITNESS LIMITED – PREMIUM TOO FAT - AVOID.

The Mumbai based fitness company, which has pan India presence, is entering the capital markets through IPO. The company proposes to issue 60, 50,000 equity shares of Rs 10 face value in the price band of Rs 123-128. The issue will open on 21-04-10 and close 0n 23-04-10. IIFL are the sole BRLM.

PROMOTERS -  Madhukar Vishnu Talwalkar,  Prashant Sudhakar Talwalkar,  Vinayak Ratnakar Gawande,  Girish Madhukar Talwalkar, Harsha Ramdas Bhatkal and  Anant Ratnakar Gawande.

BUSINESS

Talwalkars are one of the largest fitness chain in India, offering  a  diverse  suite  of  services  including  gyms,  spas,  aerobics  and  health  counseling  under  the  brand  “Talwalkars”. “Talwalkars” has pioneered the concept of gyms in India and today is a recognized name in the health and fitness industry.   Presently, they operate 51 health clubs in 24 cities, in 11 states, serving over 55,000 members.

OBJECTS OF THE ISSUE

• For setting up of additional health clubs.
• To repay certain unsecured loans.

FINANCIALS           RS IN CRORES

                           

	08	09	SEP 09
TOTAL INCOME	38.49	59.42	35.88
NET PROFIT	4.51	5.68	3.19
EPS	23.23	28.91	16.00
RONW (%)	39	33	8.34

RISKS AND CONCERN

1. Company operates in a highly competitive market and face stiff competition from other players operating both in organized and un-organized sectors. Some foreign players have also entered the Indian market.

2. Disputed brand - There exists a Group which owns and operates gyms under the same or similar name and which can claim the history of the brand. Further, any deficiency in the quality of services, equipments, training, etc. provided by these gyms may adversely affect the brand image.

3. CARE has awarded grade – 3 for the IPO indicating average fundamentals.

VALUATION AD RECOMMENDATIONS

For the half-year ended Sept -09 the net profit earned is Rs 3.19cr. This translates into an EPS of Rs 2.60 on the fully diluted post issue capital of Rs 24.11cr. At Rs 128, the company discounts FY 10 earnings by almost 50 times. The valuation is very much stressed. AVOID SUBSCRIPTION.

Promoters holding post issue will be 59.39%.